Question: I have been reading your articles and other posts about finance. While I find most of them very informative, I find them difficult to apply. How do I find the discipline to follow the rules that you, finance advocates, always talk about?-Joshua via Facebook

Answer: Let me start by saying this, “money is behavioral and not mechanical.” It is too challenging for us to follow the money “rules” because we think we can just flip a switch and be on our way like a computer program. The famous author Dave Ramsey said, “Money is 80 percent behavior and only 20 percent skill.” The struggle will always be about our behavior and how consistent we are with such behavior. The money “rules” may be very simple such as “do not spend more than what you earn,” “live below your means,” “invest early” and so on. However, simple is not the same as easy and therein lays our struggles.

Finance advocates can give ideas that seem very sound but can sometimes be impractical. For instance, you will hear us say, “do not drink expensive coffee, do not upgrade your smart phones etc.” They are logical ideas, but hey, where’s the fun in that? I am a father of four kids and I know how important rules are, without them our household will be in constant chaos but my wife and I also learned how to set rules, relax the rules and be flexible—in other words, we are trying to strike a balance. With regard to money matters, it is the same—balance is key.

Having a budget is very important, you will need to track and allocate what you should be spending on. One of the many reasons why people are in a financial mess is that they are unaware they are over-spending. By the time they realize they are, it may be too late. A budget tells you where money should go, not just where it went. Allocating your money is critical to you being able to achieve your financial goals.

However, your budget should not be too stringent that it does not allow ‘fun’ items. Some finance advocates will give you very strict recommended budgets that even many of them can’t follow themselves.

For instance, you might have heard or read experts telling you that you should not spend your 13th month pay on buying gifts and festivities and just save and invest all of them. While it is a good suggestion, it’s actually easier said than done. We are people and we need to have fun, removing it will make us feel money is a hard taskmaster and we will find ourselves rebelling.

How do you strike a balance then? Unfortunately, there are no hard and fast rules on this. You will have to experience trial and errors until you find a balance that works for you. If your budget is too stringent that you feel like you are missing out on many things, adjust your budget. When you look at your bank account and you get stressed because your funds are so small, adjust your budget.

Know your priorities, we should all be responsible about our future. You should not sacrifice long-term gains by enjoying short-term benefits. After several trials and errors, I am sure you will find a balance that will allow you to enjoy the fruits of your labor, without sacrificing a comfortable future. After finding that balance, you will still need to recalibrate it from time to time—that’s what life is all about.

Be part of the country’s most empowering investing conference – #iCon2017 this May 27, 2017 at the SMX Aura. Join me and the country’s leading experts and let us help you build your future! For details, visit www.bit.ly/ICON_2017

#WillToWin2016

The world continues to change, the nation continues to change.

To thrive in today’s environment, the need to win needs to be instilled in the hearts and mind of people and organization, lest one will find itself forgotten in obscurity or worse, obsolescence. Now more than ever, discipline is not only needed, it is fundamental.

On October 1, 2016, Francis Kong will headline a conference that will equip participants with the disciplines to success. The event is aptly titled “The Will to Win”. Venue will be at the Crowne Plaza Hotel, Robinsons Galleria, Q.C. from 1 to 6pm.

Francis Kong is the country’s top motivational and inspirational speaker and personal development coach. He has been in the forefront of pushing many Filipinos not only to be inspired but also to be excellent. Excellence is something that can thoroughly equip many of us with today’s situation. Francis Kong is a TOFIL awardee and a multi-awarded speaker, columnist, author and multi media personality. With thousands of engagements speaking to virtually every top corporation in the Philippines and hundreds of conferences, Francis Kong is the undisputed influencer in his field.

As the main speaker of the event, Francis Kong will tackle the following topics:

1. Intellectual discipline
2. Emotional discipline
3. Skills and competence discipline
4. Personal growth discipline

Joining Francis Kong in the conference will be Gretchen Ho, Carlo Ople and myself.

Gretchen Ho is a Filipino volleyball player and television host. She was a volleyball standout of the Ateneo Lady Eagles. She was instrumental in bringing interest to the sport of volleyball, a sport now enjoying unprecedented popularity. Gretchen Ho will speak on physical disciplines.

Carlo Ople is one of the country’s foremost thought-leader in the area of social media and digital marketing. From gamer to blogger and now a managing partner of a leading digital agency, he was influential in brining his agency industry awards and record-breaking revenue. His team was also instrumental in the digital success of the “AlDub phenomenon.” Carlo will be discussing disciplines in the digital economy.

As a personal finance advocate, my work has been in the teaching and coaching of Filipinos in the area of personal finance. With over 200 lectures a year, speaking in 12 nations outside the Philippines, writing books and columns, my advocacy is to see a financially empowered and productive Filipino. I am tasked to speak on financial disciplines.

The learning fee is P2,000.00. Seating will be dependent on first pay, first served arrangement so reserve and pay for your slot early!

To secure a slot, click http://successoptionsinc.com/

It’s time to have the #WillToWin2016

This event is presented by Sun Life

Question: I am Sam, in my 30s and an employee. After many years, I was finally able to open two investment accounts, one for UITFs and another one for stocks. After joining many Facebook groups on investing and reading your blog, I learned about the strategy called peso cost averaging. Is peso cost averaging always the best strategy? As I am a long-term investor, wouldn’t it just be better to make a lump sum investment instead? Thank you for your help.—Sam via e-mail

Answer: Hi Sam! Congratulations on opening an investment account, and two for that matter! It is good to know that you’re taking the initiative to read and learn about investing. It’s always better to do research and study first, instead of facing something head on, especially in investing. Learning and researching beforehand tells me that you have the discipline to make smart decisions, instead of depending solely on your instinct and gut feeling. Making smart decisions is important when it comes to investing.

As for your question, peso cost averaging is a great strategy because this builds the habit of setting aside money for your investments regularly, unlike lump sum payments. However, it is not without drawbacks.

Pros and cons of peso cost averaging or PCA

Pros

It is affordable. Gone are the days when you need hundreds of thousands of pesos to start investing. Today, you can open an investment account for P5,000 and put as little as P1,000 depending on the frequency you prefer (pro tip: put a set amount into your investment on a monthly basis). PCA comes into play when you buy investments, be it more units of your UITFs or stock shares, on a regular basis. For those who cannot afford a lump sum investment and have only a few thousands to spare, PCA is a good first step into investing.

You ride market highs and lows. Markets tend to follow an up-and-down cycle. One day, company A’s stock may be priced at P2 per share, and then the following day, it can dip to P1.50. PCA evens out your risk by buying shares in different prices. Sometimes you can buy shares that are a little bit more expensive than the last time you bought them, but you can also buy shares for a lower price at other times. In a lump sum investment, if you buy shares during a market high and it tanks, it will be harder to recuperate your losses, unlike in PCA, where you buy shares during both market highs and lows.

You lessen your emotional investment. When you put a lump sum investment and it tanks the following day, week or month, it would be harder on your psyche than if you put in P1,000 every month through PCA and lost. When you do PCA, you become mechanical, rather than emotional, when it comes to your investments. You’re putting in P1,000 every month because you’ve built the habit. If the market tanks, it’s the best time for you to buy, unlike in lump sum investing—when you buy high, you pray for the market to go up so you don’t lose your hard earned money.

Cons

You can miss out on bigger returns. PCA allows you to ride the highs and lows of the market, so this evens out your risk. But you’ve heard the saying, ‘high risk, high reward,’ and when you buy shares during a market low with a lump sum investment, you may be jumping for joy when you get your returns. A 20-percent return on a one-time P500,000 investment is P100,000. In PCA, you’ll be buying stock shares or index fund units at different prices, so your returns may not add up to P100,000 even if you’ve put in P500,000 over time. It’s best to note that no one can really time the market and there’s no saying when the market will bottom out, so it is best to do your research first before deciding on whether to do lump sum investing or PCA.

It is more costly. As you know, every time you make a trade, whether it’s a buy or a sell, you pay a certain amount of fees, such as transaction or servicing fees, trust fees and management fees, among others. Fees vary depending on your investment (e.g. mutual funds, UITFs, stocks), so it’s best to check the website of your provider or broker for the specifics. In PCA, if you invest P1,000 every month, you will pay fees once a month or every time you make buy and sell. In a lump sum investing, you only pay twice—once you buy and once you sell.
Now, that you know the pros and cons of peso cost averaging, you can decide whether or not to push through with PCA. However, as I mentioned earlier, PCA helps you build the habit of saving (instead of spending) your money. You can do both: put in a lump sum to open your initial investment account and then add a percentage of your income regularly.

Learn practical and effective investment strategies from the biggest investment conference of the year iCon2016! We have assembled an impressive roster of experts for this year’s conference with Rex Mendoza of Rampver Financials, stock market advocate Marvin Germo, BSP Deputy Governor Diwa Guinigundo, Agri investor and business speaker Dodong Cacanando, entrepreneurship advocate Paulo Tibig, Sun Life Asset Management President Riena Pama and yours truly. May 28, 2016 at the Samsung Hall of SM Aura. Visit www.iCon2016.info for details and registration.